Reproduce the first scene of the year! Can A share usher in a new round of rise?

category:Finance
 Reproduce the first scene of the year! Can A share usher in a new round of rise?


Just this weekend, the central bank lowered its benchmark and released 900 billion yuan of funds. In the early morning of September 7, Beijing time, the outlying areas were better off. The S&P Dow Jones Index has announced that it will include A shares in the six major S&P Dow Jones index families.

According to the China Securities News, on September 6 (US time), 1099 Chinese A shares were formally included in the S&P Emerging Markets Global Benchmark Index (S&PEmerging BMI), which will take effect at the opening of September 23. Of the 1099 A-shares, 147 are large-capitalized, 251 are medium-capitalized and 701 are small-capitalized, excluding GEM stocks.

The research institutes estimate that the three major indices (MSCI, S&P Dow Jones and FTSE Russell) will bring up to $70 billion (active + passive allocation) of incremental funds, equivalent to nearly $500 billion of RMB. These two items totaled 1.4 trillion yuan.

Li Qilin, who has just served as the director of Liaison Securities Research Institute, said that from a medium-term perspective, in the case of repression of real estate, the core of credit derivation, it is more difficult for broad money to achieve structural broad credit, and liquidity release may bring about a more serious asset shortage. From the grassroots survey of Chinese journalists of securities firms, we can see that some real estate funds are entering the stock market in the near future. So is the second bull market really coming in the year?

Dual Engine Started

In the market at the beginning of this year, there are two kinds of funds to act as bull market engine: one is financing funds, and the other is going north. Firstly, from the perspective of financing balance, in February, March and April, the financing balance soared by 230 billion yuan.

Secondly, from the perspective of funds going north. In the first quarter, the net purchases of capital from Beisheng reached 125.435 billion yuan, while in the last two months of last year, the net inflows continued to reach 63 billion yuan.

Now, similar to the beginning of the year, both types of funds are buying A shares without hesitation. Firstly, from the point of view of financing funds, the recent trend of continuous increase has reached 93088.8 billion yuan by September 5, and nearly 48.646 billion yuan in the past three weeks.

So, will the second wave of the years rise be triggered? Li Xinjun, chief investment officer of Ping An Securities, said there seemed to be no worrying shortfall in September. On the contrary, all kinds of benefits are accumulating, and the market will be on fire according to reason. And in the medium term, under the pressure of real estate, what kinds of assets are worth allocating? The stock market is undoubtedly a better choice.

The alignment movements are similar.

The actions of the bull market engine are the same, and the actions of the central bank are similar. On January 4, the Peoples Bank of China announced its decision to reduce the deposit reserve ratio of financial institutions by 1 percentage point. Among them, January 15 and January 25 were reduced by 0.5 percentage points respectively. The two releases totaled about 1.5 trillion yuan. On the afternoon of September 6, the central bank lowered the deposit reserve ratio of financial institutions by 0.5 percentage points (excluding financial companies, financial leasing companies and auto financing companies). The central bank said that the long-term funds released by the reduction were about 900 billion yuan, of which about 800 billion yuan were released by the comprehensive reduction and about 100 billion yuan were released by the directional reduction.

Unlike last time, after the announcement of the benchmark reduction, the current expectations of interest rate cuts are also rising. The Monita study shows that the recent road map of interest rate cuts in monetary policy is looming.

The first step is to tighten the real estate financing policy and control the great obstacle of interest rate reduction.

The second step is to reform the formation mechanism of LPR, dredge the transmission of MLF to incremental lending interest rate, and prepare tools for reducing lending interest rate.

The third step is to reduce the cost of bank capital and expand the profit margin of banks.

Tianfeng Securities said that the reduction period remains unchanged and the bull market direction remains unchanged. Historically, quasi-cyclical interest rates have been downward as a whole; because of various disturbances, interest rates do not necessarily follow each fall, but eventually fluctuate around the fundamentals; as long as they continue to fall, interest rates continue to fall.

Incremental funds are coming

According to Merchants Securities estimates, on September 23, S&P Dow Jonesinclusion in A shares will bring a passive incremental capital of $1.1 billion to A shares. On the same day, FTSE Russells promotion of the A-share inclusion factor came into effect, which will also bring about a passive incremental capital of US$4 billion for A-share, totaling US$5.1 billion (RMB will exceed 36.2 billion).

In addition, people familiar with the situation told Chinese journalists of securities firms that funds from the original speculation have been entering the stock market in the near future. Recent securities margin balances of some brokerage business departments have been continuously increasing, and there has been a continuous increase of tens of millions of dollars per day in the business departments. Some of the money is the original speculation funds.

Why Chinas Assets Worth Looking Up

From the recent data, there are some positive phenomena in economic indicators. In August 2019, Caixin Chinas manufacturing PMI recorded 50.4 points, a further significant rebound of 0.5 percentage points from last month; Caixins service industry PMI recorded 52.1 points, a slight rebound of 0.5 percentage points from last month. The Caixin China Composite Output Index recorded 51.6, up 0.7 percentage points from last month.

Monitas research shows that with the acceleration of counter-cyclical policies and their gradual effect, there are preliminary signs of recovery of Chinas economic downturn. In terms of employment absorption, price performance and enterprise confidence, the service industry is obviously differentiated from the manufacturing industry, reflecting the wheel of economic transformation moving forward.

In August, the manufacturing output index rebounded for the second month in a row, reaching its best level since April. Manufacturers with higher output in the month generally said that the reason was signs of stronger customer demand. Employment index has risen sharply and is very close to the prosperity and decline line. Some manufacturers have increased their employment because of rising demand. Others have eliminated labor expansion by reducing costs and improving automation levels. The obvious improvement of production and employment is the biggest bright spot of PMI in August, which may reflect the low level of inventory in manufacturing industry and the high sensitivity to the improvement of demand.

From the perspective of policy expectations, some research institutions said that the meeting of the Finance Committee held on September 1st adjusted the timely and moderate counter-cyclical adjustment to increase the counter-cyclical adjustment of macroeconomic policies, which marked the rise of steady growth and steady adjustment. The executive meeting of the State Council made important arrangements at both ends of fiscal policy and monetary policy, and some details obviously exceeded expectations. It can be said that the expectations of the Chinese market are obviously more stable than those of overseas markets. For example, the overall reduction since this year, the market has more full expectations. As for the structural problems of Chinas economy, the policy level is also working hard to solve them. The management has a very clear goal to protect the economy and the market, and to develop the industry and the region.

From the perspective of development potential, Chinas industrial development is developed step by step along the comparative advantages of factors. The first stage is driven by labor factors and the cost of labor is cheap. China has developed a huge export industry chain and processing industry with a preliminary industrial foundation. The second stage is driven by capital, which forms the industrial chain of infrastructure and real estate, which promotes the acceleration of urbanization. Now the resource endowment of labor force is declining. Marginal returns on capital fell. Guo Lei of Guangfa Securities believes that the next step should be to enter the third stage, driven by technology, innovation and labor quality, namely engineer dividend drive. In the next decade, China and Southeast Asia will be an important part of the new round of global division and specialization. Chinas engineer dividend will drive China to do high-end, industrial upgrading; Southeast Asias low-cost substitution will drive Southeast Asia to do substitute processing and low-end manufacturing. This is the worlds two largest manufacturing Alpha. If it can be effectively utilized, Engineers Dividend is Chinas demographic dividend in the next decade.

Traditionally, as the price of capital goes down, the valuation of stocks tends to rise. From the current situation, the direction of long-term low interest rates should not change, coupled with the intensification of capital market reform and the implementation of the strategy of real estate market yield, guaranteeing manufacturing industry, the market should develop in a warmer direction. From a technical point of view, next Mondays market strength, if enough, will break the emerging top deviation. Of course, if there are too many people who borrow money to cash in, the market will still face adjustment pressure in the short term. However, adjustment may also be a good opportunity to get on the bus.

Source: Liu Song_NBJ9949, China Responsible Editor of Securities Dealers